Emerging economies seem to be far more complex and difficult to manage compared to developed ones and Indian economy is just the right example. Just when the economic pundits and RBI were reading ‘end of trough phase’ of business cycle, challenges in form of trade deficits, appreciating rupee, high inflation and international shock in the form of crude price increase re-surface.
No way do I mean that the whole economy is threatened and may slip back into recession due to any of the unfavorable indicators. But, for sure, a part of the economy may slip into inflation faster than the whole economy.
That part of economy which is small and more constrained in terms of resources . From a consumer perspective, the low income group is going to be impacted the most and for obvious reasons if GOI decides to increase the price of petroleum products, diesel for sure. From industry standpoint, SMBs (Small and Medium businesses) are expected to be impacted the most. Empirical evidences indicate that SMBs are more constrained in terms of financial strength and hence are most impacted at times of recession. The situation gets even worse for SMBs supplying to OEMs where they minimal pricing control and bargaining power except a predictable order book in good times.
Forthcoming increase in diesel and petrol prices are surely going to impact this segment of economy. But what are options left with the managers of Indian economy. Let me think and revert. 🙂